Spain’s largest banks soared in Madrid trading after the Supreme Court said they aren’t liable for mortgage stamp duty payments that could have imposed billions of euros in extra costs.
The court reversed an earlier ruling that lenders should pay the tax, which had typically been passed on to customers, sparking fury across the Spanish political spectrum and prompting warnings that lawmakers will take the matter up.
“This is very good news for the banks — they have won their argument in a dramatic way,” said Ricardo Wehrhahn, managing partner at Intral Strategy Execution, a business and banking consulting firm in Madrid. “A vote the other way could have been disastrous.”
The court’s vote was 15 in favour and 13 opposed. A ruling against the banks threatened to eat into profits in a sector that has struggled to generate revenue in a low-interest environment. A decision to make lenders pay the tax retroactively over four years would have cost lenders 5 billion euros ($5.71 billion), Budget Minister Maria Jesus Montero said in Madrid.
Banco de Sabadell SA led gains, rising as much as 15 percent in Madrid before paring back to 3.4 percent. The initial ruling on October 18 caused banks to slump and the court froze the sentence a day later, citing concerns about the “enormous economic and social impact” of the decision.
CaixaBank SA shares were also among the four biggest gainers in the Ibex 35, rising 4.2 percent to 3.72 euros per share. Banco Santander SA and Banco Bilbao Vizcaya Argentaria SA were both up as much as 3.2 percent.
The ruling Socialist Party’s congressional spokeswoman said the government will take action after the reversal, promising “good news” after the cabinet meeting and saying that the Spanish justice system had been weakened by the decision. Sanchez scheduled a press conference at 12.30 p.m. in Madrid to discuss the ruling.
“The banks win and citizens lose,” Pablo Iglesias, secretary general of the anti-establishment Unidos Podemos party, wrote on Twitter. “The independence of the Supreme Court is called into question; democracy is weakened.”
The party, an ally of Sanchez’s minority government, called for a protest outside the Supreme Court on Nov. 10.
El Pais newspaper reported that the government could make legal changes to force the banks to pay the tax. The Supreme Court ruling could also be overruled if it’s taken to European courts, Mirabaud Securities analyst Gonzalo Lopez wrote in a report.
“The decision adopted today by the Supreme Court preserves the legal security needed for the good functioning of the market,” the Span-ish banking association said on its website.